VZCZCXRO3987
PP RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK RUEHYG
DE RUEHPOD #0159/01 1821726
ZNR UUUUU ZZH
P 011726Z JUL 09
FM AMEMBASSY PODGORICA
TO RUEHC/SECSTATE WASHDC PRIORITY 1384
INFO RUEHBW/AMEMBASSY BELGRADE PRIORITY 0558
RUEHPS/AMEMBASSY PRISTINA PRIORITY 0139
RUEHVJ/AMEMBASSY SARAJEVO PRIORITY 0150
RUEHTI/AMEMBASSY TIRANA PRIORITY 0205
RUEHVB/AMEMBASSY ZAGREB PRIORITY 0264
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHPOD/AMEMBASSY PODGORICA 1473

UNCLAS SECTION 01 OF 04 PODGORICA 000159 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EUR/SCE AND EUR/ACE 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON EAID EFIN KCRM MW
SUBJECT: THE TWO MONTENEGROS 
 
PODGORICA 00000159  001.2 OF 004 
 
 
¶1. (SBU) SUMMARY:  The 11 municipalities that make up "northern 
Montenegro" account for half of the country's territory and the 
majority of its natural resources.  However, they lag 
significantly behind the coast and center of the country in 
every leading economic indicator.  The disparity between "north" 
and "south" has potential consequences for social and political 
stability, particularly as a majority of the north's 220,000 
ethically diverse inhabitants voted against Montenegrin 
independence in 2006 and have continued to support pro-Serb 
opposition parties.  The GoM and international donors have 
belatedly recognized the need to improve conditions in the 
north.  We have launched a USD 10 million USAID program targeted 
at stimulating private sector development in the North to help 
strengthen stability in this sensitive region.  END SUMMARY. 
 
 
 
Northern Montenegro:  Plenty of Potential... 
 
-------------------------------------------- 
 
 
 
¶2. (U) The 11 municipalities (Andrijevica, Berane, Bijelo Polje, 
Kolasin, Mojkovac, Plav, Pljevlja, Pluzine, Rozaje, Savnik, and 
Zabljak) that comprise "northern Montenegro" account for over 
half the country's territory and roughly one-third of its 
population.  Bordering on Bosnia and Hercegovina, Serbia, 
Kosovo, and Albania, they possess over two-thirds of 
Montenegro's arable land, timber, lead, coal, and zinc reserves, 
and hydro potential.  The region also boasts spectacular 
landscapes, cultural heritage sites, and excellent locations for 
eco and adventure tourism.  Before the breakup of the FRY, 
several districts attracted visitors from around the region - 
notably the mountain resorts of Kolasin and Zabljak, along with 
the lake town of Plav.  They are now a shadow of what they used 
to be.  In addition, the north has considerable potential for 
niche agriculture production; for example, its natural (organic, 
with the right certification) fruits, vegetables, and medicinal 
herbs and teas, if packaged and marketed properly, could be 
exported or sold to tourists eager for an "authentic" 
Montenegrin experience. 
 
 
 
...But Investment Goes South 
 
----------------------------- 
 
 
 
¶3. (U) However, northern Montenegro, already historically poorer 
than other parts of the country, has stagnated economically in 
recent years, while the coast and Podgorica have enjoyed a 
largely tourism-driven investment boom.  The contrasts are 
stark.  For example, the north received only seven percent of 
the country's foreign direct investment in 2008, the region's 
officially reported unemployment rate of 15.3 percent was 
significantly higher than that of the center (9.4 percent) and 
coast (8.6 percent), and the north's poverty rate (14.9 percent) 
also dwarfed that of the center and coast (6.5 and 6.8 percent 
respectively).  A just-released UNDP report said the 
unemployment rate in the north is 17.8 percent, versus 2.2 
percent on the coast. 
 
 
 
¶4. (U) The northern municipalities also have the least developed 
infrastructure and lag behind the rest of Montenegro in both 
financial and human capital.  A recent GoM survey found that 
only 45 percent of northern residents know how to use a 
computer, compared to about two-thirds of residents of the 
center and coast.  In addition, only 57 percent of northerners 
live in areas with internet access (and only 25 percent reported 
use of the internet), as opposed to 73 percent in central 
municipalities and 85 percent along the coast.  Development is 
constrained by the region's geographic isolation from markets 
and by a broad lack of understanding of market opportunities. 
 
 
 
A Litany of Complaints 
 
------------------------ 
 
 
PODGORICA 00000159  002.2 OF 004 
 
 
 
 
¶5.  (SBU) Whether in Plav, Pluzine, or Pljevlja, we invariably 
hear the same litany of complaints during our trips to the 
north: 
 
 
 
-- Infrastructure:  Residents cite infrastructure improvements 
-from roads to public transport to schools to medical services - 
as essential for northern development.  Improved roads top 
everyone's lists, but we also hear how the lack of waste and 
waste-water plants means that waste sometimes is dumped directly 
into the region's pristine lakes and rivers. 
 
 
 
-- Investment:  Our interlocutors frequently complain that the 
coast and capital get the lion's share of the Montenegro's 
investment.  For example, the 2008 budget for coastal tourism 
hub of Budva (population 15,000) was 46.5 million euros, while 
the budget for all 11 northern municipalities combined (with 
222,000 inhabitants) was only 54.7 million euros.  As the Mayor 
of Mojkovac told us, funds for individual municipal budgets (and 
by extension for coastal investments) came from the national 
budget, meaning, he said, that the north was "severely 
neglected." 
 
 
 
-- Job Loss:  Factory closures following the breakup of the FRY 
hit the north especially hard, and have contributed greatly to 
the lack of employment options in the region and consequent 
outflow of young adults to the south and overseas.  Remaining 
residents have turned to small-scale and subsistence 
agriculture, some small timber production, and small tourist 
ventures. 
 
 
 
-- Emigration:  While the GoM has no firm statistics, GoM and 
local contacts tell us that there has been significant 
emigration to Podgorica, the coast, Serbia, Western Europe, and 
the U.S.  Older citizens in particular point out that the 
bustling towns of their youth are today shells of their former 
selves.  Emigration has depopulated the region of many of its 
brightest and most energetic residents. 
 
 
 
Potential Spillover Effects 
 
--------------------------- 
 
 
 
¶6. (SBU) The north-south developmental gap also has potential 
ramifications beyond economics: 
 
 
 
-- Rule of Law:  Our interlocutors contend that high 
unemployment and economic deprivation has led some locals to 
engage in illicit activities.  The north's geography and 
topography - coupled with undermanned, under equipped, and under 
funded law enforcement authorities - make it an ideal venue for 
smuggling, particularly of narcotics.  For example, police 
sources tell us that Rozaje and Plav are prime transit points 
for narcotics and other contraband moving from Kosovo and 
Albania along a "northern Montenegrin corridor" into Bosnia and 
on to Western Europe.  Montenegro's media contain a steady 
stream of reports on drug-related seizures and arrests in Rozaje 
Municipality (no doubt dwarfed by the volume of smuggling which 
is not interdicted). 
 
 
 
-- Ethnic Tension:  In addition, the ethnic mix in the north 
poses potential challenges.  According to the 2003 census, Serbs 
make up 37 percent of the north's residents, followed by 
Bosniaks/Muslims 35 percent, and Montenegrins (20).  While 
Albanians comprise less than two percent of northerners, they 
account for 26 percent of residents in Plav, nestled between 
Kosovo and Albania.  By contrast, Serbs comprise 27 percent of 
the population of Montenegro's ten remaining municipalities, 
 
PODGORICA 00000159  003.2 OF 004 
 
 
while Bosniaks make up less than one percent and Muslims only 
two percent of those municipalities.  (In the country as a 
whole, Montenegrins comprise 43 percent of the population, 
followed by Serbs (31), Bosniaks (8), Muslims (5), Albanians 
(5), and Croats (1).) 
 
 
 
-- Montenegro has arguably done the best job in the region of 
managing inter-ethnic relations, and there are at present few 
signs of ethnic strife - in fact, residents of mixed towns like 
Bijelo Polje proudly cite their municipalities' long tradition 
of tolerance.  Nevertheless, opinion polls consistently show 
Serbs - the majority of whom reside in the north -- to be 
strongly negative toward the current DPS-led government.  Ties 
to Serbia also are reinforced by the fact that the GoS grants 
Montenegrins Serbian citizenship upon request, and many 
Montenegrins, especially from the north, work and study in 
Serbia.  (Note:  It is important to understand that the ethnic 
identity of many Orthodox Montenegrin citizens is fungible.  An 
Orthodox Slav who supports Montenegrin statehood might identify 
himself as a "Montenegrin," while his brother, who opposed 
statehood, could call himself a Serb; "Montenegrin" and "Serb" 
are as much political identities as they are ethnic identities.) 
 
 
 
 
-- Serb-majority towns Andrijevica (72 percent against), 
Pljevlja (64), Pluzine (76), and Zabljak (61) opposed 
independence, as did other northern towns of Berane (53), Savnik 
(57), Kolasin (58), and Mojkovac (56).  Among the 11 northern 
municipalities, only Bosniak/Muslim-majority Rozaje (91 percent 
in favor) and Plav (79 percent), and Bijelo Polje, where 
Bosniaks/Muslims and Montenegrins form a combined majority, 
supported Montenegrin statehood. 
 
 
 
-- Serbs, particularly in the north (and in Serb-majority Herceg 
Novi, on the coast) also have continued to vote for "Serb" 
opposition candidates and parties.  In the April 2008 
presidential elections, President Vujanovic turned in his worst 
totals (with the exception of coastal, Serb-majority Herceg 
Novi) in Andrijevica, Kolasin, Mojkovac, Pluzine, Pljevlja, and 
Zabljak.  Opposition candidates Andrija Mandic (Montenegro's 
leading Serb nationalist, now with New Serbian Democracy - NOVA) 
and Srdjan Milic (who heads the civic, but heavily Serb, 
Socialist People's Party - SNP) did well in the north (while 
Mandic matched his overall national total of 19.5 percent, Milic 
got 14.3 percent versus 11.9 nationwide).  Their parties did 
better than average in the region during the March 2009 
parliamentary elections (SNP received 19.7 percent of the vote 
in the 11 northern municipalities, versus 16.5 percent 
nationwide, and NOVA received 10.1 percent in the north versus 
9.1 nationwide). 
 
 
 
--While both Mandic and Milic opposed independence, it is 
important to note that both (and particularly Milic) accept 
Montenegrin statehood.  In addition, this year's parliamentary 
election represented a step in the direction of moderation as 
Milic's more centrist party made gains, and Mandic's split with 
more radical elements (two small radical Serb splinter parties 
got only about 1,500 votes in northern municipalities.)  That 
said, Mandic's party in particular still contains many strong 
advocates of reunification with Serbia, and as late as October 
2007 (after the passage of Montenegro's Constitution), Mandic 
himself called on his supporters to boycott state institutions 
and reject state symbols.  And this April, both parties 
boycotted the playing of the national hymn at the opening 
session of the new Parliament. 
 
 
 
-- Although Serbs are by far the largest source of antipathy 
towards the current government, Montenegro reportedly has a few 
hundred "Wahabbis," concentrated in Rozaje and Plav. (More on 
the Wahabbi issue to be reported septel). In the 1990s, a 
handful of Montenegrin Muslims flirted with the notion of 
autonomy for Montenegro/Serbia's Muslim Sandzak region.  Thus 
far, neither of these currents has been a major factor on the 
national political scene. 
 
 
PODGORICA 00000159  004.2 OF 004 
 
 
 
 
GoM Taking Notice (Finally) 
 
--------------------------- 
 
 
 
¶7. (SBU) Until recently, almost all GoM-funded northern 
development projects in the north were small.  But the GoM has 
belatedly recognized the importance of improving economic 
conditions in the north, and officials have told us they intend 
to focus increasingly on the neglected northern municipalities. 
In fact, the GoM's flagship infrastructure project - the highway 
from Bar to the Serbian border - is often cited as a cure-all 
for the north's ills.  However, the project will take more than 
five years to complete once construction begins.  On the other 
hand, another road from Risan on Kotor Bay to Zabljak is now 
partially complete and should be finished entirely by the end of 
2009/early 2010.  It will link coastal transit areas with UNESCO 
heritage site Durmitor National Park, which straddles Pluzine 
and Zabljak municipalities. 
 
 
 
¶8. (SBU) In September 2008, the GoM launched the "Posao za Vas" 
("A Job for You") initiative to promote employment and 
entrepreneurship by providing concessionary credits to small 
northern businesses.  PM Djukanovic recently announced that the 
program will be expanded with 18.15 million euros allocated for 
¶2009.  To date, the GoM has received about 500 applications, 
which could create roughly 2,000 new workplaces.  However, 
opposition parties and some local representatives charge that 
only "selected" candidates with demonstrated allegiance to the 
ruling coalition have received benefits under this program. 
 
 
 
¶9. (U) The GoM also reportedly plans to launch two other 
significant projects in the north:  the development of a 
comprehensive tourism plan for the Bjelasica and Komovi mountain 
region, and a tender for the construction of four large hydro 
plants on the Moraca River.  Tenders for a number of smaller 
hydro projects also have been initiated. In September 2008, the 
GoM also launched a 4.5 million euro  initiative to develop the 
Bukovica region in the far north, which saw incidents of "ethnic 
cleansing" of Bosniaks and Muslims in 1992. The funds will go 
toward developing roads and housing to facilitate refugee 
returns. 
 
 
 
Comment 
 
------- 
 
 
 
¶10. (SBU) Bridging the north-south develop gap and creating more 
balanced prosperity throughout the country is a key mission 
priority.  In fact, our largest assistance program in 
Montenegro, "Stimulating Economic Development of the North" 
(STARS), targets entrepreneurs, especially in the agriculture 
and tourism sectors.  It also aims to strengthen links between 
northern businesses and markets in the rest of Montenegro, as 
well as neighboring countries.  Also, we believe that our own 
attention to the region will serve as a catalyst for greater 
involvement by the GoM and international donors, as well as 
foreign investors, bolstering long term stability in the entire 
area. 
MOORE